Accounting for the Tech Sector

Choosing the Right Accountancy Software for your Business

For a new start up in the tech sector, you’ll want accounting software that not only handles the basics (invoicing, expenses, bank feeds, VAT / tax compliance) but also supports things like R&D tax credits, cash flow forecasting, and likely various integrations (Stripe, PayPal, your product’s billing, etc.). Initially, good reporting is essential for investors but also scalability for the future growth of the company. Below are key factors to look for when setting up your accountancy function that will stand you in good stead for the future: 

Key factors to consider in accounting for the tech sector: 

• Scalability & multiuser roles – As you grow (more staff, investors, external providers), you’ll want multiple users, flexible permissions, ability to add modules and tailor the package as you develop as a business.
• Support for R&D tax credits and grants – If your startup is involved in R&D (software development, experimental tech), you’ll want software or integrated services that help you gather documentation, timesheets, project costs, to make claims to HMRC etc. 
• Compliance – For VAT registered companies, Making Tax Digital (MTD) is a requirement for VAT, meaning software needs to have a direct link to HMRC. Similarly Real Time Information (RTI) submissions for payroll need to link to HMRC if you are preparing them in house. 
• Cashflow visibility & forecasting – For a startup, managing runway & making projections is critical.  
• Good reporting & dashboards – For investors, board, internal decision making: reports that show burn rate, cash flows, profit/loss, forecasts are essential. 
• Cost – Startups likely need something affordable to begin with, then scale with features – but avoid getting stuck with something that either becomes very pricey or lacks features and forces you to switch later.

If you would like a more in-depth discussion about which accountancy package is the perfect fit for you and your company, Pat Karas, our Outsourcing Manager, will be more than happy to assist. Let us help guide you through the perfect package for your accounting needs.

Email Pat Karas

Research and Development 

The UK government offers generous R&D tax reliefs to tech startups and companies engaged in innovation, including software development. If your company is building new technology, improving existing tech, or solving technical challenges, you may qualify — but the rules are specific. 

HMRC defines R&D as “work to resolve scientific or technological uncertainty”. 

For a technology company, this often means the areas listed below:

What Does Not Count?

• Routine development using well-known tools or libraries (e.g. building a CRUD app using React or Django if it doesn’t solve new problems) 
• Bug fixing, UI tweaks, or normal software maintenance
• Simple integrations using standard APIs (unless there’s technical uncertainty) 
• Market research, user experience work, or business model development 

Key Test: “Technological Uncertainty” 

The core HMRC test is: 

“Was there a scientific or technological uncertainty that a competent professional could not readily resolve?” 

If yes and you tried to resolve it — that’s potentially R&D.  For example:

• Solving scaling problems where no known method exists 
• Developing a product that pushes known tech boundaries 
• Working with emerging or experimental tech (e.g. LLMs, blockchain, edge computing) 

If you think your company is completing R&D and can potentially claim R&D tax credits, George Lale in our tax team will be more than happy to assist with more information.

Email George Lale 

Grant Funding

For development in various research sectors, it is worth looking into available grants for your sector. Grants available will depend on the company’s size, location, research area and various factors. Most will require detailed accountancy reporting and often match funding. Funding opportunities that are currently available, are detailed below: 

As with all funding, there are things to look out for: 

• Many grants require you to be an SME (small business), or be in collaboration with universities / research institutions. 

• There may be match funding, or expectations to show how you’ll sustain the project / exploit results commercially. 

• Deadlines matter — some are fixed; others are rolling. Starting early helps. 

• Geographic eligibility: Some EU grants require being based in a member or associated country. UK is associated with Horizon Europe, so often eligible. 

In the accounts team, we help our clients complete Innovate and other grant applications and provide the regular financial information to support the claims. If you would like guidance on this, please speak to Joanne Alistoun in our Accounts department. 

If you are already preparing grant claims and these are required to be audited, which is often the case, please speak to Benjamin Hayes who regularly completes these grant audits.  

Email Joanne Alistoun – Email Benjamin Hayes